Your Annual Financial Checkup: A Yearly Money Checklist

Just like an annual visit to the doctor, a yearly financial checkup helps you catch small problems before they grow and confirms that the things you’re doing well are still working. It doesn’t have to take long. A few focused hours once a year can keep your finances on track.

Pick a date you’ll remember, such as your birthday, the new year or the start of tax season, and put it on your calendar. Then work through the steps below.

Calculate your net worth

Start with the big picture. Your net worth is everything you own minus everything you owe. Add up the value of your bank accounts, retirement and investment accounts, and other significant assets like your home or car. Then subtract your debts, including mortgages, car loans, student loans and credit card balances.

The number itself matters less than the direction it is moving. Compare it with last year’s figure. If it is growing, your overall plan is working. If it is shrinking, the rest of the checkup will help you figure out why.

Review your budget and spending

Look back at the past year’s spending. Did it match your plan? Were there categories that consistently ran over or expenses you didn’t anticipate? Many people discover irregular costs, such as annual subscriptions, gifts or car maintenance, that deserve their own monthly savings going forward. Adjust your budget so it reflects how you actually live, not how you wish you lived.

Check your emergency fund

Your emergency fund should cover several months of essential expenses. If your rent, bills or family size changed this year, your target probably changed too. Top up the fund if it has fallen short or if you used it during the year, and make sure it is kept in an accessible, federally insured savings account.

Update your debt payoff plan

List every debt with its balance, interest rate and minimum payment. Note what you paid off this year and what remains. If you’re carrying high-interest credit card debt, decide on a payoff strategy, such as tackling the highest interest rate first or the smallest balance first. Check whether refinancing or a balance transfer could lower your costs, but read the terms carefully.

Review your credit

You can pull your free credit reports from Equifax, Experian and TransUnion at AnnualCreditReport.com, the official site for free reports. Check each report for accounts you don’t recognize, incorrect late payments or outdated information, and dispute any errors directly with the bureau. Reviewing your reports also helps you spot identity theft early.

Review retirement contributions and investments

Look at how much you contributed to retirement accounts this year and whether you can increase it, especially if you received a raise. Confirm you are contributing enough to get any employer match. Contribution limits for retirement accounts are adjusted periodically, so check the current limits on the IRS website.

Next, review your investments. Has your mix of stocks, bonds and cash drifted from your target because some investments grew faster than others? Rebalancing brings it back in line with your risk tolerance. Also check the fees you pay, since expense ratios and account fees quietly reduce returns over time.

Review your insurance

Insurance needs change with your life. Review your health, auto, home or renters, life and disability coverage. Did you buy a home, have a child, change jobs or acquire valuable items? Make sure your coverage limits still fit your situation, and shop around if premiums have risen sharply.

Update beneficiaries and important documents

Beneficiary designations on retirement accounts and life insurance policies generally override what is written in a will, so keeping them current is essential. Check them after any major life event such as marriage, divorce, a birth or a death in the family.

Review your will and other estate planning documents, such as a power of attorney and health care directive. If you don’t have these documents yet, consider making them a goal for the coming year. Also make sure a trusted person knows where to find important papers.

Check your tax withholding

If you received a large refund or owed a significant amount at tax time, your withholding may need adjustment. The IRS offers a free Tax Withholding Estimator on its website that can help you update your W-4 with your employer. Getting withholding right means more money in your paycheck during the year or no unpleasant surprise in April.

Review subscriptions and recurring bills

Go through your recurring charges one by one. Cancel subscriptions you no longer use, and call providers to ask about better rates on phone, internet and insurance. These small annual reviews often free up a surprising amount of money.

Set goals for the coming year

With a clear picture of where you stand, choose one or two money goals for the year ahead. Make them specific and measurable, such as paying off a particular credit card by June or saving a set amount for a down payment. Write them down and break them into monthly steps.

Celebrate your progress

Finally, take a moment to notice what went well. Paid off a debt? Saved more than last year? Stuck to a budget through a tough stretch? That progress is worth celebrating. If you share finances with a partner, go through the checkup together, so you’re both informed and working toward the same goals.